Middle East & Africa
Key Emerging Markets
Qatar, UAE, Oman, Nigeria, South Africa, Ethiopia
Oil Production, Petroleum, Natural Gas, Agriculture, Mining, Finance and Real Estate
The Middle East is the point of intersection of three continents – Asia, Africa and Europe. Historically it was the economic and cultural crossroads between these three continents, with strategic waterways that allowed them to establish trade routes with one another. Today its geographical location accords the Middle East significant military importance for world powers interested in gaining greater influence over the region and its adjacent areas.
Africa is the second largest and second most populous continent in the world, but is commonly seen as backward and deprived of opportunities. With its wealth of minerals, metals, oil and other lucrative commodities, investors have exploited Africa just for its natural resources. Over the years, the economies of Africa have expanded and diversified, reducing their dependence on the natural resources bestowed upon them. Rapid economic development has transformed Africa to become the second fastest growing region in the world, and the new emerging markets investment frontier.
Stability of Region
Since the onset of the Arab Spring uprising three years ago, the Middle East and Africa (MEA) region has been rife with protests, revolutions, and war. During periods of prosperity, deep-rooted issues such as the sorely-lacking voice and accountability of the people lay latent. Notably, Yemen, was devastated by a civil war with roots in the failure of a political transition supposed to bring stability to the country following an Arab Spring uprising.
Political instability is a common trend across the Sub-Saharan continent. Rampant corruption, disputed elections and civil wars plague many African countries and continue to contribute to poor business conditions in the region. Even in South Africa, the economic leader of the continent, crime rates are persistently high and labour strikes are commonplace. Such instability has a negative impact on investors’ perceptions of the region.
Oil forms the backbone of many MEA countries, with the region holding more than 75% of the world's total oil reserves. The oil-rich GCC countries such as Saudi Arabia and UAE earn enormous incomes from the sale of oil and gas, while the other MEA countries earn their incomes through far less profitable sources. With half of the world’s known oil and gas reserves, MEA is the bedrock of the world’s hydrocarbon supply. However, in recent times, regional overreliance on oil to fund state fiscal budgets have become more of a liability. Several states, such as the UAE, have made commitments to diversify their economies diversify away oil revenue. This is an important turning point for the Middle East as the world starts to turn away from hydrocarbons to renewables instead.
The Sub-Saharan Africa economy is traditionally supported by the primary industries. The East African oil boom has attracted considerable investments into countries like Kenya and Tanzania. The agriculture sector is still supporting the non-urbanised parts of the continent. With rising middle class in urban areas, industries for consumer goods and financial services have started to show significant developments, especially in key emerging countries such as Nigeria and Kenya.
Political tensions will continue to be the main roadblock of progress for most MEA nations. A politically driven attack on Saudi oil reserves in 2019 once again made apparent the fragility of geopolitical relationships in the region, and the potential implications it may have on the economy-at-large. It remains imperative that nations continue their diversification efforts or risk the full-blown effects of volatile prices, as we saw during the peak of the COVID – 19 Pandemic. However, with the talks ongoing on lifting on Iran sanctions, Iran's rich oil resources can serve as one of the major growth factors for the Middle East in the near future.
The inflow of foreign direct investments from China has steamrolled Africa's growth in the past decade. However, despite it's strong trade links with Europe and China, domestic demand for Africa is key to economic success in the long term. The dawn of industrialisation has helped consumerism to take place throughout the region. The shift from a mainly export-based industry to more diversified growth drivers would stabilise the prospects of the continent and reduce the reliance on economic conditions in export markets. With heavy hits on its economy from COVID-19, the fiscal stimulus packages issue by African countries proved pose detrimental future issues as the governments' reserves drain and strains their abilities promote future economical growth in that area.